India in an excellent position to serve emerging economies

June 26, 2014 6:47 am

India has a large working population which can be a competitive advantage for labour intensive manufacturing
 German companies have always shown faith in Indian market. Moreover, today they are increasing their investments considering the advantageous situation present in India. Rajesh Nath explains some favourable conditions for India to be global manufacturing hub in future.
More population more employmentIt has become common to often make emphatic claims that India is set to become the next major global manufacturing hub. However, attaining this goal needs a realistic view, considering the myriads of problems the manufacturing sector is facing today, amidst growing concerns of global economic slowdown, poor infrastructure, volatile currency fluctuations and inflexible labour laws.
India has a large working population which can be a competitive advantage for labour intensive manufacturing. The ability to right-size and downsize employment, aligned to the market demands for the products manufactured in India, is imperative, if we are to grow our manufacturing operations in India. Also the laws in India should facilitate the same with due provisions inbuilt to protect workers interest and avoid exploitation. It will create more employment opportunity and encourage activity in India.
Fillip factorsIndia offers potential investors in the manufacturing sector a number of competitive advantages. India’s own domestic market is large, with over 600 million rural consumers. Workers’ wages in India are less than half of those in China. India has a large talent pool including a strong engineering eco-system.
From a strategic point of view, growth in the coming decades will come from the developing world. India is in an excellent position to serve emerging economies in Latin America, Africa and elsewhere in Asia. Currently, that represents 11 per cent of India’s export market, but it is set to grow dramatically.
ImpedancesIn times of growth it becomes difficult to tackle high turnover. When the economy grows at a rate beyond 7-8 per cent, companies face a skill shortage and turnover increases from a manageable 2-3 per cent to as much as 20-30 per cent. This creates an unstable environment for manufacturing.
In India, the taxation is so skewed that it is often easier and cheaper to import equipment than manufacture it locally. This is the biggest impediment for the growth of our manufacturing industry.
Another challenge is public sector control and the requirement that companies bidding on very large infrastructure projects must have previous experience in the field, which many Indian companies lack. Also the state governments should be proactive in making manufacturing zones attractive for automobile and other manufacturers. Further, labour laws should be corrected.
VDMA’s approachGerman companies look at the Indian market with long term engagement which includes exploring possibility of investments in India. Across sectors there is a strong presence of German engineering companies in India with many  companies like Siemens, Bosch, Festo, Bosch Rexroth, Schaeffler Group, KSB, ThyssenKrupp Industries, Liebherr, Schwing Stetter, Putzmeister to name a few, have invested substantially in the Indian market.
Rajesh Nath, Managing Director, German Engineering Federation (VDMA)